The 7bn Recapitalisation of BOI and AIB / BOI's bad debts may go from 3.8 to 6 billion

So the Bank Recapitalisation is still being hammered out here between the banks and the Government. An economist, Brian Lucey on Morning Ireland today says he believes the hole will require filling with more than 7bn in the first place because if EBS can write down 13% of loans and it's a small player then what might some of the bigger banks write down?

Enda Kenny also om Morning Ireland a little earlier said he wanted the Government to use Price Waterhouse Coopers Accountants to assess the books of the banks before recapitalisation ...

Brian Lucey also believes the banks should have been recapitalised back in November when they were coming cap in hand but now the shoe is on the other foot ...

Everyone is going to do paycuts for the senior bankers. Why does our Government have to follow though? Why couldn't they announce this a month ago and lead the world rather than running around with its tail between its legs.

I had an interesting conversation with a Banking chap recently bemoaning that if Bankers did not get their bonuses they would be unable to attract calibre staff in this global economy. They would leave and ply their talents overseas.

A colleague said he would be more than glad to chip in to cover their airfares if they were financially impinged. I think that about sums up general sentiment.

I would love to hear the banker tell you where he is going to upsticks and go in this current climate. I know many bankers. I know very many honest bankers who are upstanding both in their work and in their life. These people are the definition of competent. On the otherhand I know an awful lot of bankers, some earning a fortune, who don't know their arm from their elbow. But then again this is true of any industry, particularly during a boom, isn't it? I mean only an eeijit would buy a site in Ballsbridge for 400 million... it is easy to take those risks in the boom. There are plenty of prudent developers who will survive this downturn, they just probably won't make the news.

....the logic behind my proposal (January 29, 2009) for one or more new ‘good banks’ to be established, capitalised with public money and with additional financial support from the state for new lending and new funding, while the toxic assets of the old banks are left with the owners and creditors of the ‘legacy banks’, is being echoed in proposals from Joseph Stiglitz (February 2, 2009), George Soros (February 4, 2009) and Paul Romer (February 6, 2009)....

The various proposals differ in detail. Romer’s proposal is essentially the same as my own. Stiglitz argues, according to the British Daily Telegraph that “the government should allow every distressed bank to go bankrupt and set up a fresh banking system under temporary state control rather than cripple the country by propping up a corrupt edifice”.

Soros proposes not to remove the toxic assets from the banks’ balance sheets (which would require them to be valued, which is not possible) but instead put them into a “side pocket”.

....The logic is simple. Many (probably most, possibly all but a handful) high-profile, large border-crossing universal banks in the north Atlantic region are dead banks walking - zombie banks kept from formal insolvency only through past, present and anticipated future injections of public money. They have indeterminate but possibly large remaining stocks of toxic - hard or impossible to value - assets on their balance sheets which they cannot or will not come clean on.

....The public financial support offered in the form of capital injections ...and the creation of one or more publicly owned ‘bad banks’ has been a complete failure.

....Offering to pay enough to the existing owners of the toxic assets to induce these owners to sell them would require paying over the odds. That might not leave enough fiscal resources to support the new lending activities that are so urgently needed.

....The US, the UK and several other continental European countries are at risk of emulating Ireland, where the government first guaranteed all the liabilities of the banks (other than equity) and only after that began to nationalise the banks. This leaves the Irish government today in the not too enviable position of having to choose between sovereign default and bleeding the tax payer and the beneficiaries of normal public spending to make whole all the creditors of the banks...

I had an interesting conversation with a Banking chap recently bemoaning that if Bankers did not get their bonuses they would be unable to attract calibre staff in this global economy. They would leave and ply their talents overseas.

A colleague said he would be more than glad to chip in to cover their airfares if they were financially impinged. I think that about sums up general sentiment.

I am amazed this point is not made more forcefully more often. Bear in mind. this is often the same reasoning employed by our leaders as to why we need to pay them astronomical salaries.

If the proposition is that we must pay enormous salaries to attract the best people to these roles, two possibilities exist:

Our leaders and senior bankers are a bunch of clowns, thieves or thieving clowns who should not be left unsupervised at any time and the proposition is false.

We are not paying our leaders and senior bankers nearly enough as we appear to have attracted only clowns, thieves and thieving clowns to the jobs and the proposition is true.

Perhaps we could have a poll to ascertain the view of Machinistas on this dilemma?

You should be able to open a poll coc - if you want to open a seperate thread linking this one go ahead . You'll find the poll tools at the bottom of the edit window as you create the thread in the first place.

Let me know if you can't do it because I think it's set that everyone should be able to open a poll, if they know how.

Two things are systemically important. The first is to restore the operation of key financial markets that have become illiquid. The Fed is doing a reasonable job in that regard. The second is to restore bank lending to the real economy. Neither objective requires that the existing banks be saved, let alone that their existing shareholders and creditors receive any financial support from the state. We can save banking without saving the banks or the bankers. The ‘good bank’ proposal demonstrates how to do this.

I had not considered this before. Have our 2 big banks become so systemic in Ireland that we are about to try and save the 'banks' at the risk of destroying 'banking' ?

I'll ponder that for today.

PS what is TARP money ?

Squire wrote:

I had an interesting conversation with a Banking chap recently bemoaning that if Bankers did not get their bonuses they would be unable to attract calibre staff in this global economy. They would leave and ply their talents overseas.

A colleague said he would be more than glad to chip in to cover their airfares if they were financially impinged. I think that about sums up general sentiment.

Good one. It is an entirely bullshit fabrication spun for their self glorification. Assholes.

How many of the Anglo resignees have been snapped up by international banks ?

A bank needs software, buildings, staff, systems, accounts, regulatory know how and contacts with financial institutions. We cannot magic-up a new bank out of nowhere so Soros's version might be the best.

The new bank/good bank appears to be a refined version of the corrollary of a bad bank save that the bad bank is let go bust.

TARP monies are monies the USA agreed to use to buy up troubled assets. It was Bush's plan and the one that McCain wanted the presidential campaign suspended for.

I don't think all bankers are assholes but I don't think there is international competition for their services either bar those of absolutely stellar genius. I haven't met any of those.

The more senior ones do have a lot of responsibility though and take on the risks of fiduciary duties and oversee the safe keeping of a lot of money. It is also hard work which requires dilligence and an understanding of complex administrative systems. If we need people to do that job in the future then we cannot pay them peanuts. At a certain level a smart person with financial experience can always do something else in the private sector. However, we do not have to shower them with diamonds either.

Bank of Ireland have just said they their losses have gone from 3.8bn to up to 6bn. Lenihan is saying on radio that they have an existing capital base which will cover this ....

He says Tier 1 core risk capital existing in BOI will now be 9% ... high by international standards. There will be an 8% return on this investment, he says.

MacCoille is at pains to get him to say "it is enough" at 7bn

Lenihan is saying "at our best assessment at present" it is enough.

Bankers Pay:--------------He says there is a CAP going to be put on top-level pay. He says what was looked at last night in terms of remuneration is only a start ..

Those at Fault--------------Should those at fault be ejected? Lenihan is saying there is no evidence of dodgy dealings so why would anyone be let go. Gilmore was on earlier saying the Boards need to be cleared out. Lenihan says that international markets would be shocked if they knew the Govt. were appointing CEOs of banks. In this climate would they?

Anglo/IL&P------------It is important that all information about this subject be disclosed now, says the Minister.

The media picture: "The Wild West of Finance"----------------------------------------------Lenihan is acknowledging that the reputational damage is something that needs to be addressed and confidence restored through regulatory oversight. Are there big questions about Ireland Inc. in terms of Debt asks MacCoille. "We're in a better position now than 4 months ago" says Lenihan. ... ??????

Why didn't the Minister not know about the 7bn at the time?-----------------------------------------------------------Lenihan says there is constant shunting of money between banks on a daily basis - MacCoille is asking him why he wasn't aware that there was a figure of 7bn getting moved around. I don't know how he got around that question I'll have to listen to it later again.

Are you considering your position?-----------------------------------I most certainly am not. "The fact of the matter is I am doing my job"

Apparently he didn't read a report at the time but that's ok because action was taken by others in his Department ... ????

Quote :

BOI's impaired loans may double

Bank of Ireland has doubled its estimate of the amount of loans it believes may not be repaid.

The bank told markets that in a worst case scenario, the value of impaired loans on its balance sheet could increase by almost 60% to €6bn by 2011.

fun and games.... the UK scandal involving the lad let go for being risk averse has blown up, meanwhile according to Finfacts this morning, Merrill Lynch lost 27billion and paid out million dollar bonuses

For me at least, I understand that the bond market (our real masters at the moment, since the Govt needs to borrow so much money) requires sacrifices such as the pensions levy.

However, we are having a public versus private sector scrap at the moment when the REAL focus of public and private anger should be that the BANKERS ARE STILL GETTING THEIR FAT BONUSES AND SALARIES.

The public sector is already paying for this, to be joined by the private sector when they raise PAYE, PRSI and property tax in the next budget

The Government now has sigificant power and representation on the board of the banks; THEY SHOULD BE USING IT

We, the taxpayers, do NOT wish to be taking paycuts while paying for the bankers bonuses. This is effectively what we are doing at the moment. I know we need the banks to function, but if we cut max remuneration to 100,000 euro and removed all bonuses for anyone on more than 50,000 per annum, they WOULD still function BECAUSE NO ONE ELSE IS HIRING.

Why won't the politicians crack down?? They can have their bonuses back when they pay off the taxpayer!

Question: Where did all the good money lent by the banks go to? It didn't disappear. The govt might have gotten some lolly from taxes due to land transactions and what not, but that's all gone now. Surely, the sellers of land, constuction people and so forth must have gotten the vast majority of the lolly, and it just might be sitting in the very bank vaults that are getting the tax-payer dig-outs. Strange auld world.

(I'm assuming those that can't pay back loans have had all their assets stripped and any cash remaining has already been returned to the relevant banks. Surely our govt didn't allow these rouge borrowers to hold onto any capital. Afterall, if a wage-earner doesn't pay back on a loan, the banks demand that jail time be served.)

Obs: Not only are the banks too "socially" important to fail but the new and improved capitalist model seems to suggest that those very people who inhabit the management ranks, and who've bankrupted their businesses, are the only people who are deemed worthy to remain at the helm of their defunct businesses.

Question: Where did all the good money lent by the banks go to? It didn't disappear. The govt might have gotten some lolly from taxes due to land transactions and what not, but that's all gone now. Surely, the sellers of land, constuction people and so forth must have gotten the vast majority of the lolly, and it just might be sitting in the very bank vaults that are getting the tax-payer dig-outs. Strange auld world.

(I'm assuming those that can't pay back loans have had all their assets stripped and any cash remaining has already been returned to the relevant banks. Surely our govt didn't allow these rouge borrowers to hold onto any capital. Afterall, if a wage-earner doesn't pay back on a loan, the banks demand that jail time be served.)

Obs: Not only are the banks too "socially" important to fail but the new and improved capitalist model seems to suggest that those very people who inhabit the management ranks, and who've bankrupted their businesses, are the only people who are deemed worthy to remain at the helm of their defunct businesses.

Between the jigs and the reels, Government got about 50% of the price of every house in taxes. Capital gains tax on land I think is only 20%. Most land is bought from farmers who go and use to buy a farm further out from town. The rest goes in bank shares etc., pensions or on farm investment.

A lot of developers who had made money went out and bought land at top prices in the last 2 or 3 years with money borrowed from the banks. The Banks are rolling over the interest and staggering on like the Japanese zombie banks living on the hope that in a few years the land will have some sale value again. When they eventually foreclose the true losses will be apparent.

I can't help thinking about the country and western song (something like): Mama don't let your sons become cowboys.

Hell no, mama, get your son and daughters into corporate bank headquarters. Climb and claw your way to the top echelons and you're home free. Succeed and your rich. Fail and your still rich. Not many jobs going like that in any society.

I was told by a lecturer that are only two ways in which to make real money in our economies. Either run your own business or go into banking. Seems he was right.

(Btw, I gotta believe some of that lovely lolly is still lying about. Maybe I'm thinking it's like Bluebeard's buried treasure. Maybe the govt got its hand on a pile of the loot but some, whatever sequence of transactions occured, had to end up in the bank vaults of some people down the line. However, a treasure map and metal detector ain't going to work in finding this Pirate's treasure unfortunately.)

HBOS owns a 28 billion black hole.... we were worried about the Hadron Collider?? UK news now concerned that this will bring Lloyds down with it...2 failed banks for the price of one. Interestingly, the recently ex-UK bank regulator Crosby?? Crosbie?? who may have presided over the merger, used to work at Hbos. Lloyds now all over centrefold Guardian for tax evasion (de new 40% shareholders, HM govt, have been going through the books)

Ya know, if some closed tax havens and cleaned up banks are the eventual result of this, we the consumer/taxpayer may eventually be better off.... morally at least!!

there's a reason bank is a 4 letter word

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Subject: Re: The 7bn Recapitalisation of BOI and AIB / BOI's bad debts may go from 3.8 to 6 billion

The 7bn Recapitalisation of BOI and AIB / BOI's bad debts may go from 3.8 to 6 billion